29 August, 2016

Why be B? A Letter to Fellow Entrepreneurs

I know that you work insanely hard. Your company consumes your thoughts during most of your waking hours. I also know that you have a fierce desire to “win,” climbing ever higher to reach the next peak or goal. That’s because I’m just like you. This intensity is what makes us successful entrepreneurs.

So here’s what I would like you to think about: If you desire winning, exactly what game are you playing and how do you know when you’ve won? If you’re like some business owners, you probably have a pretty simple answer to that question: The only way to win is to bring more money to shareholders.

But the fact is, this is a fundamentally flawed way of thinking about business. This notion continues to be predominant, even though history has shown us again and again that the “shareholder value theory” fails even on its single rule of “make more money.”

Even Jack Welch, former CEO of General Electric (GE), who seemingly “won” at the shareholder value game, disparages the approach. In 2009, he gave an interview with Francesco Guerrera of the Financial Times and said, “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy … your main constituencies are your employees, your customers and your products.”

Let’s play a new game

So, as a fellow business owner and EO member, I challenge you to play a different game, wherein we redefine what “winning” means. The new game is one where companies are driven to serve their customers, employees and community… not simply to increase profits for its shareholders.

In his book, Leaders Eat Last, Simon Sinek actually shows that playing the one-dimensional “profit game” benefits nobody (owners included). Case in point: Over the past 30 years, GE has prioritized their shareholders – whereas Costco has prioritized employees and customers.

Costco pays its workers’ wages well above the industry standard, plus affordable health coverage, vacation time and a matched 401(k). This investment pays off in terms of a shockingly low rate of employee turnover, at 17% overall (in contrast, turnover at competitor Wal-mart is at 44%, close to the industry average). They also have one of the lowest shrinkage (employee theft) figures in the industry.

Costco’s loyal and experienced workforce returns high productivity to the firm and good service to shoppers—and results in a solid bottom line. Founder and former CEO, Jim Sinegal, says, “When employees are happy, they are your best ambassadors.”

Enter the B Corp

Luckily, there is an easy first step to playing this new game— by becoming a B Corp. I can speak from experience because my company, Kinesis, just joined this growing community of change-makers.

At Kinesis, we found that becoming a B Corp was a system to provide ongoing data points and measurements of our success in this new game.

From our inception, Kinesis has always focused on being a better business. But in the beginning, we didn’t exactly know what that meant, other than hiring amazing people and providing them with a great place to work. Over time, we’ve gained tremendous clarity about our mission and how it drives every action we take. We know that we are a purpose-driven, person-focused, community-oriented company.

At our annual planning session in early 2015, we realized that while we are proud of what we’ve accomplished since our doors opened in 2000, it was time to raise our standards even higher by becoming a certified B Corporation. This move was right for Kinesis for the following reasons:

We want to officially “practice what we preach” by going through a rigorous, third-party certification of our ongoing commitment to social and environmental performance, accountability and transparency.

This certification aligns closely with our core valuesof “Share the Good,” “Do the Right Thing,” “Build to Last” and “Think Big,” and puts us in a growing community of likeminded companies all seeking a better way of doing business. These include Patagonia, Etsy, Warby Parker, Ben & Jerry’s, Natura, and many others.

Kinesis wants to provide meaningful work to each and every person who works here, and be a company that our clients can feel good about hiring.

We found the process of becoming a B Corp to be very motivating to our company. It allowed us to take stock of the areas where we wanted to improve our impact, both immediately and in the future. As a result of going through the assessment process, we made improvements to our employee guidelines, streamlined our recycling process, added benefits for our team and increased our involvement in community and charity organizations.

So, fellow entrepreneur, I invite you to join us in the new game that doesn’t play to win at all costs, but instead focuses on being a company that is the best for your employees, your customers, your community and for the environment.

Kind regards,

Shawn Busse
CEO of Kinesis

P.S. Our overall score is an 85 on the B Impact Score. In the spirit of friendly competition, I will be the first to congratulate you if you can beat us. Game on!